Rep. Stam: More Lottery Advertising in NC?

Published Friday, April 29, 2016 at 11:41 am

Release from Rep. Paul Stam’s office: 

On opening day, Sen. Jerry Tillman filed Senate Bill 728 (“Lottery – JLOC Recommendations”), which would allow the Lottery Commission to double the money it spends on advertising. Proponents claim that this measure will significantly increase money for education. The 1% of lottery revenue that can already be spent on advertising helps bring in (projected) $580 million in net revenue to the state. The proposed legislation would allow 2% of lottery receipts to be spent on advertising. This doubling of advertising would bring in a projected $46 million in additional revenue – a dramatic drop in the revenue brought in per advertising dollar.

Stam

Stam

The $46 million in additional revenue is a tax increase. A tax is a financial charge or other levy imposed upon a taxpayer by a state or the functional equivalent of a state to fund various public expenditures.[1] Economists, court precedents, and the National Tax Foundation agree that the net revenue from the lottery is the functional equivalent of a tax which is embedded in the cost of the ticket. This is not a private entity calculating its own risks and rewards; it is a State enterprise. As a tax this is very inefficient. Most taxes cost less than 1% in administrative cost. But for the Lottery the administrative cost to raise the next $46 million is over $18 million, which is over 28% of the expected return![2]

Some argue that the money plays an important role in supporting education. This notion is misguided. Only 5% of the money for education comes from lottery revenue.[3] Only 2% of the General Fund comes from the Lottery, and only 1% of the Total State Budget is produced by the Lottery. Many have persuasively argued that the lottery actually reduces support for education funding since gamblers think they have done their part for education by buying tickets.

What this increased advertising would really do is produce more misleading and deceptive advertising.[4] The lottery’s advertising tactics are specifically designed to get more NC residents to buy into a bad deal. We should be looking to pass common-sense legislation to prevent misleading advertising, not enabling the NC Lottery to expand its deceptive practices. For an explanation of this latter point please see my article at http://paulstam.info/wp-content/uploads/2016/03/Packet-for-Oversight-Committee-word-docs.pdf .

[1] See Charles E. McLure, Jr. “Taxation”. Britannica. http://www.britannica.com/topic/taxation.

2 See  http://www.nc-educationlottery.org/uploads/docs/Annual%20Report%20fy2014.pdf for report.

3 See http://paulstam.info/wp-content/uploads/2016/02/Lottery-Document-for-Oversight-Committee.pdf, pages 5-8.

4 See http://paulstam.info/wp-content/uploads/2016/03/Packet-for-Oversight-Committee-word-docs.pdf

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